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MBIA, Bank of America Battle Coming to a Head

Further trouble for Bank of America came on Wednesday with the
publication online of 15500 pages of court documents from litigation between Bank of America and MBIA. MBIA and
Bloomberg News have been trying to get the court to release still more documents, and a hearing on that question will take place Nov. 29.

The release of the documents may create larger headaches for Bank of America, since they could potentially be used by other plaintiffs making similar claims over problem mortgages sold by Countrywide.

At the very least, the documents may be an embarrassment for Bank of America. At one point during court testimony, a Bank of America executive who fears he may come across as not answering questions directly says "I don't mean to sound like Bill Clinton".

In a separate document, a different Bank of America executive concedes the bank is "famous...not in a good way."

Palmer and other analysts believe Bank of America will ultimately settle the case. Analysts have estimated a settlement will cost Bank of America roughly $2-3.5 billion, though they have been surprised by Bank of America's tenacity in fighting MBIA.

MKM Partners analyst Harry Fong, who like BTIG's Palmer recommends MBIA shares, believes Bank of America is fighting so hard because a settlement acceptable to MBIA might "set a bad precedent" for a
proposed $8.5 billion settlement between Bank of America and several large institutional investors that is tied up in litigation.

Of the legal battle between MBIA and Bank of America, Fong writes, "We could easily paint a picture that shows this case, if it goes all the way to trial, will not reach a final conclusion until the end of 2014 or 2015."

A Bank of America spokesman did not respond to questions. An MBIA spokesman declined to comment.